<PAGE>   1
                                  F O R M    10-Q
        
                         SECURITIES AND EXCHANGE COMMISSION
        
                              Washington, D.C.  20549
        
    [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934
    
    For the quarterly period ended December 31, 1995
    
                                       OR
    
    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934
    
    For the transition period from ..................... to ................
    
    Commission File Number 0-2901
    
                            KRUG INTERNATIONAL CORP.
                     -------------------------------------------
                (Exact name of registrant as specified in its charter)
    
                  Ohio                                         31-0621189
    -----------------------------------                       --------------
    (State or other jurisdiction of                       (I.R.S. Employer
      incorporation or organization)                    Identification No.)
    
    6 North Main Street  Suite 500  Dayton, Ohio                 45402-1900
    ----------------------------------------------               -----------
    (Address of principal executive offices)                     (Zip Code)
    
              (513) 224-9066
    -----------------------------------------------
    (Registrant's telephone number including area code)
    
    
    
    
    
         Indicate by check mark whether the registrant (1) has filed all
    reports required to be filed by Section 13 or 15(d) of the Securities
    Exchange Act of 1934 during the preceding 12 months (or for such
    shorter period that the registrant was required to file such reports),
    and (2) has been subject to such filing requirements for the past 
    90 days.






    
    Yes   x   No
       ------   ------
    
    
    The number of Common Shares, without par value, outstanding as of
    February 1, 1996 was 5,076,950.

<PAGE>   2
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
    PART I. FINANCIAL INFORMATION                                              
    ITEM 1. FINANCIAL STATEMENTS                                               
                   KRUG INTERNATIONAL CORP. AND SUBSIDIARIES                   
                          CONSOLIDATED BALANCE SHEETS                          
                       (all dollar amounts in thousands)                       

<TABLE>
<CAPTION>
                                                  December 31,    March 31,    
                                                      1995          1995       
                                                  ------------   -----------   
<S>                                               <C>            <C>
    ASSETS
    Current Assets:                                                            
      Cash                                        $     2,059   $       363    
      Receivables                                      15,634        17,205    
      Inventories (Note B)                              7,867         9,992    
      Prepaid expenses                                    652           699    
                                                   -----------   -----------   
           Total Current Assets                        26,212        28,259    
                                                   -----------   -----------   
    Property, Plant and Equipment                      16,259        16,561    
      Less accumulated depreciation                     6,613         6,256    
                                                   -----------   -----------   
                                                        9,646        10,305    
                                                                               
    Pension Asset                                       2,057         2,185    
    Deferred Tax Assets                                 2,504         3,078    
    Other Assets                                          285           342    
                                                   -----------   -----------   
    Total Assets                                  $    40,704   $    44,169    
                                                   ===========   ===========   
    LIABILITIES AND SHAREHOLDERS' EQUITY                                       
    Current Liabilities:                                                       
      Bank borrowings                             $             $     1,106    
      Accounts payable                                  6,685         7,529    
      Accrued expenses                                  5,033         5,292    
      Income taxes                                                      567    
      Net current liabilities of discontinued                                  
        operations (Note E)                               650           600    
      Current maturities of long-term debt              1,179         1,364    
                                                   -----------   -----------   
           Total Current Liabilities                   13,547        16,458    
                                                   -----------   -----------   
    Long-Term Debt                                     12,328        13,162    
    Net Non-Current Liabilities of Discontinued                                
      Operations (Note E)                                 341           481    
                                                   -----------   -----------   
    Total Liabilities                                  26,216        30,101    
                                                   -----------   -----------   
    Shareholders' Equity:                                                      
      Common Shares, no par value:                                             
        issued and outstanding, 5,051,950                                      
        at December 31, 1995 and                                               
        5,011,523 at March 31, 1995                     2,526         2,506    
      Additional paid in capital                        4,162         4,090    
      Retained earnings                                 7,660         6,699    
      Foreign currency translation adjustment             140           773    
                                                   -----------   -----------   
           Total Shareholders' Equity                  14,488        14,068    
                                                   -----------   -----------   
    Total Liabilities and Shareholders' Equity    $    40,704   $    44,169    
                                                   ===========   ===========   
</TABLE>

              See notes to consolidated financial statements                   

<PAGE>   3
                                                                               
                                                                               
                   KRUG INTERNATIONAL CORP. AND SUBSIDIARIES                   
                      CONSOLIDATED STATEMENTS OF EARNINGS                      
            (all dollar amounts in thousands, except per share amounts)        
                                                                               
                                                                               
                                                                               
<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED       
                                                          December 31,         
                                                   -------------------------   
                                                      1995          1994       
                                                   -----------   -----------   
                                                                               
<S>                                               <C>           <C>                                    
    Revenues                                      $    22,175   $    22,698    
                                                                               
    Costs and Expenses:                                                        
      Costs, including product                                                 
        development                                    19,535        19,685    
      Selling and administrative                        2,104         2,100    
      Interest expense                                    288           318    
      Other (income) expense                               (3)          (42)   
                                                   -----------   -----------   
                                                       21,924        22,061    
                                                   -----------   -----------   
                                                                               
    Earnings Before Income Taxes                          251           637    
                                                                               
    Income Taxes (Note D)                                  95           232    
                                                   -----------   -----------   
                                                                               
    Net Earnings                                  $       156   $       405    
                                                   ===========   ===========   
                                                                               
                                                                               
    Net Earnings Per Share                        $      0.03   $      0.08    
                                                   ===========   ===========   
                                                                               
    Average Common and Common Equivalent                                       
         Shares Outstanding                         5,058,907     5,058,017    
                                                   ===========   ===========   
                                                                               
</TABLE>
                                                                               
                                                                               
                                                                               
              See notes to consolidated financial statements                   

<PAGE>   4
                                                                               
                                                                               
                                                                               
                                                                               
                   KRUG INTERNATIONAL CORP. AND SUBSIDIARIES                   
                      CONSOLIDATED STATEMENTS OF EARNINGS                      
            (all dollar amounts in thousands, except per share amounts)        
                                                                               
                                                                               
                                                                               
<TABLE>
<CAPTION>
                                                      NINE MONTHS ENDED        
                                                          December 31,         
                                                   -------------------------   
                                                      1995          1994       
                                                   -----------   -----------   
                                                                               
<S>                                               <C>           <C>                            
    Revenues                                      $    71,104   $    67,739    
                                                                               
    Costs and Expenses:                                                        
      Costs, including product                                                 
        development                                    62,111        57,967    
      Selling and administrative                        6,653         6,498    
      Interest                                            857           940    
      Other (income) expense (Note C)                     (10)         (351)   
                                                   -----------   -----------   
                                                       69,611        65,054    
                                                   -----------   -----------   
                                                                               
    Earnings Before Income Taxes                        1,493         2,685    
                                                                               
    Income Taxes (Note D)                                 532           925    
                                                   -----------   -----------   
    Net Earnings                                  $       961   $     1,760    
                                                   ===========   ===========   
                                                                               
                                                                               
    Net Earnings Per Share                        $      0.19   $      0.35    
                                                   ===========   ===========   
                                                                               
    Average Common and Common Equivalent                                       
         Shares Outstanding                         5,049,591     5,044,494    
                                                   ===========   ===========   
                                                                               
</TABLE>
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
              See notes to consolidated financial statements                   
                                                                               
                                                                               
<PAGE>   5
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                     KRUG INTERNATIONAL CORP. AND SUBSIDIARIES                 
                       CONSOLIDATED STATEMENTS OF CASH FLOWS                   
                         (all dollar amounts in thousands)                     
                            increase (decrease) in cash                        
                                                                               


<TABLE>
<CAPTION>
                                                      NINE MONTHS ENDED        
                                                          December 31,         
                                                   -------------------------   
                                                      1995          1994       
                                                   -----------   -----------   
                                                                               
<S>                                               <C>           <C>                                 
         Net Cash Provided by                                                  
              Operating Activities                $     3,991   $     2,727    
                                                   -----------   -----------   
                                                                               
         Cash Flows From Investing Activities:                                 
                  Expenditures for property, plant                             
                    and equipment                        (195)         (270)   
                  Proceeds from sale of assets                          447    
                                                   -----------   -----------   
         Net Cash Provided by (Used in)                                        
              Investing Activities                       (195)          177    
                                                   -----------   -----------   
                                                                               
         Cash Flows From Financing Activities:                                 
                 Bank borrowings-net                   (1,077)         (287)   
                 Payments on long-term debt            (1,081)       (2,997)   
                 Sale of Common Shares                     92                  
                                                   -----------   -----------   
         Net Cash (Used In) Financing Activities       (2,066)       (3,284)   
                                                   -----------   -----------   
                                                                               
         Effect of Exchange Rate Changes on Cash          (34)            4    
                                                   -----------   -----------   
                                                                               
    Net Increase (Decrease) In Cash                     1,696          (376)   
                                                                               
    Cash at Beginning of Period                           363         1,186    
                                                   -----------   -----------   
                                                                               
    Cash at End of Period                         $     2,059   $       810    
                                                   ===========   ===========   
                                                                               
    Cash Paid For:                                                             
                                                                               
      Income taxes                                $       579   $     1,320    
                                                   ===========   ===========   

                                                                               
      Interest                                    $       838   $     1,001    
                                                   ===========   ===========   
                                                                               
    Non-Cash Investing and Financing Activities-                               
      Capital leases                              $       365   $        90    
                                                   ===========   ===========   
</TABLE>

              See notes to consolidated financial statements                   
                                                                               
<PAGE>   6
                  KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       QUARTER ENDED DECEMBER 31, 1995
                      (all dollar amounts in thousands)

Note A -- Basis of Presentation

          The balance sheet at March 31, 1995 is condensed from audited
financial statements.  The financial statements for the quarter and nine months
ended December 31, 1995 are unaudited and have been prepared in accordance with
Rule 10-01 of Regulation S-X of the Securities and Exchange Commission and, as
such, do not include all information required by generally accepted accounting
principles.  However, in the opinion of management, all adjustments, consisting
only of normal recurring adjustments necessary to present fairly the financial
position and results of operations, have been made.

Note B -- Inventories
<TABLE>
<CAPTION>

                                                December 31,     March 31,
                                                    1995           1995
                                                 -----------    -----------
<S>                                             <C>            <C> 
    Finished goods                              $     5,353    $     7,105
    Work-in-progress                                    854          1,107
    Raw materials and supplies                        1,660          1,780
                                                 -----------    -----------
                                                $     7,867    $     9,992
                                                 ===========    ===========
</TABLE>

Note C -- Other Income
        
         Other income for the nine months ended December 31, 1994 includes a
$0.3 million gain from the sale of land and miscellaneous equipment.

Note D -- Income Taxes

          The provisions for income taxes are composed of the following:
<TABLE>
<CAPTION>

    Quarter Ended December 31,                      1995           1994
    --------------------------                   -----------    -----------
<S>                                             <C>            <C>
    Domestic                                    $        89    $       134
    Foreign                                               6             98
                                                 -----------    -----------
                                                $        95            232
                                                 ===========    ===========

    Nine Monthes Ended December 31,                 1995           1994
    -------------------------------              -----------    -----------
    Domestic                                    $       224    $       269
    Foreign                                             308            656
                                                 -----------    -----------
                                                $       532    $       925
                                                 ===========    ===========
</TABLE>

<PAGE>   7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note E -- Discontinued Operations
          
          In prior years, the Corporation discontinued the operations and
disposed of substantially all of the net assets of its Industrial Segment. 
Remaining obligations related to this Segment includes a leased property in
Knoxville, Tennessee, a leased property in Toronto, Cananda, and possibily
product liability claims related to products sold prior to the sale of the
domestic Industrial Segment.
<PAGE>   8
Item 2.              MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Continuing Operations

                  Revenues of $22.2 million for the quarter  ended  December 31,
1995 were  $0.5  million  lower  than the  comparable  quarter  of fiscal  1995.
Approximately $0.3 million of this decrease was due to the unfavorable effect of
currency translation.  The U.K. Leisure Marine Segment revenue increased by $0.4
million  in  sales  volume,  offset  by a  $0.1  million  decrease  due  to  the
unfavorable  effect of  currency  translation.  The  increase  in volume for the
quarter was due to  increased  sales of the Sea Doo product  line in this fiscal
year as  compared to the  previous  fiscal  year.  The U.K.  Housewares  Segment
revenue in the third  quarter of fiscal 1996  decreased by $0.4 million in sales
volume and by $0.1 million due to the unfavorable effect of currency translation
from the third quarter of fiscal 1995. Low retail demand in the U.K. experienced
by stores and DIY sheds  continued in the third  quarter which  decreased  their
demand for our  Housewares  products.  Revenues of the U.S.  Life  Sciences  and
Engineering  Segment for the quarter  ended  December  31, 1995  decreased  $0.3
million from the  comparable  quarter of fiscal 1995 due  primarily to decreased
contract labor and subcontract  support services provided under TSSI's technical
service contracts associated with the U.S. Air Force.

                  Revenues for the first nine months of fiscal 1996 increased by
$3.4  million  from the first nine months of fiscal 1995 to $71.1  million.  The
Leisure Marine Segment  revenue  increased by $3.1 million.  $0.4 million of the
increase was due to the favorable effect of currency translation.  Substantially
all  Leisure  Marine  product  groups had  increased  volume  during the year as
compared to last year.  Good boating  weather in the U.K. in both the spring and
summer and increased sales of the Sea Doo product line in the third quarter were
the reasons of the increased  sales volume.  The Housewares  Segment revenue for
the first nine months of fiscal 1996  decreased  by $1.1 million in sales volume
which was  partially  offset by $0.4  million of  favorable  effect of  currency
translation.  Sales  volume in all  product  groups  except  ladders  and garden
products  have  decreased  due to low demand.  Revenues of the Life Sciences and
Engineering Segment increased by $1.0 million in the first nine months of fiscal
1996 as compared to fiscal 1995. This increase was due primarily to an increased
level of activity  associated  with our NASA work which was partially  offset by
decreased labor and subcontract  support services of TSSI's  technical  services
contracts for the U.S. Air Force.

                         Life Sciences and Engineering order backlog at December
31, 1995 was $48.6  million  compared  with $89.1  million at March 31, 1995 and
$116.6  million at  December  31,  1994.  During the past year,  no  significant
individual  contracts were added to the order backlog. In the Leisure Marine and
Housewares  Segments,  backlog  is  not  meaningful  due to  the  nature  of the
order-flow of these businesses.





<PAGE>   9



                  The  Corporation's  Krug  Life  Sciences  Inc.  subsidiary  is
currently  working  on a  $136  million  five  year  contract  at  the  National
Aeronautics and Space Administration  (NASA) Johnson Space Center. This contract
ends  on  February  29,  1996  and  represents  approximately  one-third  of the
Corporation's  revenues and a corresponding  percentage of its net earnings. The
recompetition  process  for  the  follow-on  contract  was  delayed  and the new
anticipated contract is targeted to start on January 1, 1997. The Corporation is
in  negotiations  for a contract  extension award to cover the interim ten month
period. The Corporation has held contracts for this type of work or similar work
at the Johnson Space Center  continuously since 1967. The Corporation intends to
aggressively seek the follow-on contract to our existing contract at the Johnson
Space Center.

                  The gross  profit  margin for the quarter  ended  December 31,
1995  decreased to 11.9% from 13.3% for the same quarter of the previous  fiscal
year.  The primary  reason for the overall gross margin  reduction is because of
decreased  Housewares Segment gross margin in the current quarter as compared to
the same quarter of the previous fiscal year. The margin reduction in Housewares
from the prior  year  continued  the  trend of the last  three  fiscal  quarters
compared  to the same  periods in fiscal  1995 - lower  margins  from  depressed
selling  prices  caused by  competitive  market  conditions  and  increased  raw
material  prices that were not fully  recovered  through higher selling  prices.
However, the Housewares Segment gross margin percentage has risen during each of
the  last  two  quarters  of  fiscal  1996  as  selling   price   increases  and
manufacturing  cost  reduction  measures  have taken  effect.  Also in the third
quarter  of  fiscal  1996,  the  favorable   resolution  of  Life  Sciences  and
Engineering  Segment  contract  issues  resulted in a reduction  of costs in the
amount of $0.24 million. This compares with $0.4 million of similar reduction of
costs in the third quarter of fiscal 1995. For the nine months, the gross profit
margin  decreased  to 12.7% from 14.4% in the prior  year.  Similar to the third
quarter,  the  decrease  in  gross  margin  for  the  nine  months  was due to a
significantly  reduced  Housewares  Segment margin. For the first nine months of
fiscal  1996,  the gross  margin of the Leisure  Marine  Segment  has  increased
slightly as compared to the prior year due to increased margins for boat engines
and personal watercraft.  The gross margins of the Life Sciences and Engineering
Segment for the first nine months of fiscal 1996 decreased  slightly as compared
to the prior year.  The decrease is due to reduced fees  received on  government
contracts.

                  Selling and  administrative  expense for the third  quarter of
fiscal 1996 was  essentially  unchanged from the same period of fiscal 1995. For
the first  nine  months of fiscal  1996,  selling  and  administrative  expenses
increased by $0.15 million from the same period last year.  Substantially all of
the increase is attributable to the unfavorable effect of currency translation.

                  Interest  expense for the third  quarter and first nine months
of  fiscal  1996  decreased  9% from the  comparable  periods  of  fiscal  1995.
Decreased  debt in the U.S. in fiscal 1996 is the cause of the interest  expense
decrease.



<PAGE>   10


                  Other  income  was  negligible  for the first  nine  months of
fiscal 1996. It was $0.3 million for the same period of the previous fiscal year
primarily from the sale of land and miscellaneous  equipment associated with the
Life Sciences and Engineering Segment in the U.S. in the first quarter of 
fiscal 1995.

                  Net  earnings  were  $0.15  million  for the third  quarter of
fiscal 1996 compared to $0.4 million for the  comparable  period in fiscal 1995.
The  decrease in net  earnings  in the  current  quarter was caused by the lower
Housewares  revenue and gross  profit  margin and the  decreased  amount of Life
Science and Engineering  contract  resolution items in fiscal 1996. Net earnings
for the first nine  months of fiscal 1996 were $0.96  million  compared to $1.76
million for the comparable  period in fiscal 1995. This decrease in net earnings
was caused by the decreased overall gross profit margin and no significant other
income in the current year.  The  Housewares  Segment was not profitable for the
third quarter nor the first nine months of fiscal 1996 whereas it was profitable
for the same periods of the previous fiscal year.


Discontinued Operations

                  The  adequacy  of the  provision  for  losses  related  to the
discontinued Industrial Segment was reviewed by the Corporation during the first
nine months of fiscal l996 and no changes were deemed appropriate.


Liquidity and Capital Resources

                  Under the Corporation's  revolving credit facility with a U.S.
business  credit  corporation,  the  Corporation  had a  loan  of  $4.6  million
outstanding  at December  31,  1995.  Availability  under the  revolving  credit
facility is based upon the billed and unbilled  accounts  receivable of its U.S.
operations up to a maximum of $10.0 million.  The credit facility  expires March
15, 2000.  Under the agreement,  the Corporation had borrowing  capacity of $2.1
million available at December 31, 1995. At December 31, 1995 the Corporation had
a $2.1 million mortgage loan outstanding on its Dayton, Ohio real property.  The
mortgage loan is provided by its five U.S. banks and matures on March 31, 1998.

                  On July 14, 1995, the Corporation's  U.K.  subsidiaries put in
place a $6.3 million 10 year term loan with quarterly principal payments of $.16
million  beginning  in  October  1995.  This  term loan is  secured  by the U.K.
subsidiaries' real property and their  cross-guarantees.  In addition,  the U.K.
subsidiaries continue to maintain a $3.9 million bank line of credit for working
capital  purposes.  All $3.9 million of the bank line of credit was available at
December 31, 1995.

                  The Corporation believes it has adequate financing in the U.S.
and U.K. to support its operations. There were no significant outstanding 
capital expenditure commitments as of December 31, 1995.


<PAGE>   11
PART II. - OTHER INFORMATION



          Item 6. Exhibits and Reports on Form 8-K

                  (A) Exhibit 27 - Financial Data Schedule

<PAGE>   12
                                                                            
                                                                            
                                  SIGNATURES
                                  ----------
                                      
        Pursuant to the requirements of the Securities Exchange Act of 1934,
KRUG International Corp. has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized         
                                                                            
                                                       KRUG INTERNATIONAL CORP.
                                                                               
                                                                               
                                                       By:  /s/ Thomas W. Kemp 
                                                       ---------------------   
                                                          THOMAS W. KEMP       
                                                       Vice President - Finance
                                                       (Principal financial    
                                                        officer and principal  
                                                        accounting officer)    
                                                                            
                                                                            
Dated:  February 13, 1996